-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, SVVyHQY2HGc9KRB3en7xf/0EWgMW6/5+WeUty99vewOJ7Avej1U3wZHZIRKM8Ibv B8g9CPKs8yHPkNtQk9roew== 0000716039-95-000068.txt : 19950814 0000716039-95-000068.hdr.sgml : 19950814 ACCESSION NUMBER: 0000716039-95-000068 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950811 SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNOCAL CORP CENTRAL INDEX KEY: 0000716039 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 953825062 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08483 FILM NUMBER: 95560955 BUSINESS ADDRESS: STREET 1: 1201 W FIFTH ST CITY: LOS ANGELES STATE: CA ZIP: 90017 BUSINESS PHONE: 2139777600 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 30, 1995 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . -------------- ------------ Commission file number 1-8483 UNOCAL CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 95-3825062 --------- ---------- (State or other jurisdiction of (I.R.S.Employer incorporation or organization) Identification No.) 1201 WEST FIFTH STREET, LOS ANGELES, CALIFORNIA 90017 ----------------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (213) 977-7600 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- Number of shares of Common Stock, $1 par value, outstanding as of July 31, 1995: 246,316,309 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED EARNINGS UNOCAL CORPORATION (Unaudited)
For the Three Months For the Six Months Ended June 30 Ended June 30 ----------------------------------------- Dollars in millions except per share amounts 1995 1994 1995 1994 - ----------------------------------------------------------------------------------------- Revenues Sales and operating revenues (a) $2,238 $2,023 $ 4,064 $3,852 Interest, dividends and miscellaneous income 14 4 26 53 Equity in earnings of affiliated companies 24 28 45 52 Gain (loss) on sales of assets 14 (10) 61 4 - --------------------------------------------------------------------------------------- Total revenues 2,290 2,045 4,196 3,961 Costs and Other Deductions Crude oil and product purchases 982 783 1,657 1,394 Operating expense 448 400 866 832 Selling, administrative and general 117 128 229 248 expense Depreciation, depletion and 240 253 467 510 amortization Dry hole costs 15 10 19 34 Exploration expense 26 29 55 54 Interest expense 76 67 146 141 Excise, property and other operating taxes (a) 261 265 501 518 - ------------------------------------------------------------------------------------------- Total costs and other deductions 2,165 1,935 3,940 3,731 - ------------------------------------------------------------------------------------------- Earnings before income taxes 125 110 256 230 Income taxes 47 51 104 108 - ------------------------------------------------------------------------------------------- Earnings before cumulative effect of 78 59 152 122 accounting changes Cumulative effect of accounting changes - - - (277) - ------------------------------------------------------------------------------------------- Net Earnings (Loss) $ 78 $ 59 $ 152 $ (155) Dividends on preferred stock 9 9 18 18 - ------------------------------------------------------------------------------------------- Net Earnings (Loss) Applicable to Common Stock $ 69 $ 50 $ 134 $ (173) ======================================== Earnings (loss) per share of common stock (b) Before cumulative effect of accounting changes $ .28 $ .21 $ .55 $ .43 Cumulative effect of accounting changes - - - (1.14) ---------------------------------------- Net earnings (loss) per share $ .28 $ .21 $ .55 $ (.71) ======================================== Cash dividends declared per share of common stock $ .20 $ .20 $ .40 $ .40 - ------------------------------------------------------------------------------------------- (a) Includes consumer excise taxes of $ 228 $ 234 $ 437 $ 457 (b)Based on net earnings (loss) applicable to common stock divided by weighted average shares outstanding 245,804 242,210 245,298 241,926 (in thousands) See Notes to Consolidated Financial Statements.
-1- 2 CONSOLIDATED BALANCE SHEET UNOCAL CORPORATION (UNAUDITED) June 30 December 31 --------------------- Millions of Dollars 1995 1994 - ---------------------------------------------------------------------- ASSETS Current assets Cash and cash equivalents $ 130 $ 148 Accounts and notes receivable 893 897 Inventories Crude oil 30 31 Refined products 136 161 Chemicals 39 46 Minerals 19 16 Supplies, merchandise and other 89 87 Deferred income taxes 97 109 Other current assets 42 33 --------------------------------------------------------------------- Total current assets 1,475 1,528 Investments and long-term receivables 1081 895 Properties (net of accumulated depreciation and other allowances of $11,168 in 1995 and $11,096 in 1994) 6,894 6,823 Other assets 119 91 - ---------------------------------------------------------------------- Total assets $9,569 $9,337 LIABILITIES Current liabilities Accounts payable $ 604 $ 688 Taxes payable 165 226 Current portion of long-term debt and capital 7 5 lease obligations Interest payable 76 87 Other current liabilities 218 251 --------------------------------------------------------------------- Total current liabilities 1,070 1,257 Long-term debt and capital lease obligations 3,771 3,461 Deferred income taxes 603 643 Accrued abandonment, restoration and 631 622 environmental liabilities Other deferred credits and liabilities 588 539 - --------------------------------------------------------------------- Total liabilities 6,663 6,522 - --------------------------------------------------------------------- STOCKHOLDERS' EQUITY Preferred stock ($0.10 par value; stated at 513 513 liquidation value of $50 per share) Common stock ($1 par value) 246 244 Capital in excess of par value 289 237 Foreign currency translation adjustment (10) (13) Unearned portion of restricted stock issued (15) (13) Retained earnings 1,883 1,847 - --------------------------------------------------------------------- Total stockholders' equity 2,906 2,815 - --------------------------------------------------------------------- Total liabilities and stockholders'equity $9,569 $9,337 - --------------------------------------------------------------------- See Notes to Consolidated Financial Statements. -2- 3 CONSOLIDATED CASH FLOWS UNOCAL CORPORATION (Unaudited) For the Six Months Ended June 30 ------------------- Millions of Dollars 1995 1994 Cash Flows from Operating Activities Net earnings (loss) $152 $(155) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities Cumulative effect of accounting changes - 277 Depreciation, depletion and amortization 467 509 Dry hole costs 19 34 Deferred income taxes (24) (26) Gain on sales of assets (before-tax) (61) (4) Other - 54 Working capital and other changes related to operations Accounts and notes receivable 21 20 Inventories 30 23 Accounts payable (84) (127) Taxes payable (61) (36) Other (101) (41) - ------------------------------------------------------------------------------ Net cash provided by operating activities 358 528 Cash Flows from Investing Activities Capital expenditures (includes dry hole costs) (596) (518) Proceeds from sales of assets 128 55 - ------------------------------------------------------------------------------ Net cash used in investing activities (468) (463) Cash Flows from Financing Activities Long-term borrowings 712 547 Reduction of long-term debt and capital lease obligations (536) (570) Dividends paid on preferred stock (18) (18) Dividends paid on common stock (99) (97) Other 33 18 - ------------------------------------------------------------------------------ Net cash provided by (used) in financing activities 92 (120) Decrease in cash and cash equivalents (18) (55) Cash and cash equivalents at beginning of year 148 205 Cash and cash equivalents at end of period $130 $ 150 - ------------------------------------------------------------------------------ Supplemental disclosure of cash flow information: Cash paid during the period for: Interest (net of amount capitalized) $152 $ 151 Income taxes (net of refunds) $184 $ 155 See Notes to Consolidated Financial Statements. -3- 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) The consolidated financial statements included herein are unaudited and, in the opinion of management, include all adjustments necessary for a fair presentation of financial position and results of operations. All adjustments are of a normal recurring nature, except for items discussed in Note 3. Such financial statements are presented in accordance with the Securities and Exchange Commission's disclosure requirements for Form 10-Q. These interim consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements filed with the Commission in Unocal Corporation's 1994 Annual Report on Form 10-K. Results for the six months ended June 30, 1995, are not necessarily indicative of future financial results. Certain items in the prior year financial statements have been reclassified to conform to the 1995 presentation. (2) For the purpose of this report, Unocal Corporation and its consolidated subsidiary, Union Oil Company of California (Union Oil), together with the consolidated subsidiaries of Union Oil, will be referred to as "Unocal" or "the company". (3) 1994 Accounting Change: Effective January 1, 1994, the company changed its accounting policy for recognizing the reduction in value of its producing oil and gas properties. Under the new policy, the company evaluates properties for impairment on a field-by-field basis instead of the country-by-country basis previously used. Impairment loss is recognized when the estimated undiscounted future cash flows (after-tax) are less than the current net book values of the properties. In the opinion of management, the use of a lower level of aggregation for applying the impairment test to producing oil and gas properties is preferable. As a result, the consolidated earnings for the second quarter and the first six months of 1994 have been restated to include the cumulative effect of the accounting change as well as the effect on the current periods. The cumulative effect of the accounting change was a charge of $447 million pretax ($277 million after-tax or $1.14 per common share) and the effect on the second quarter and six months earnings was a reduction in depreciation and depletion expense of $15 million ($9 million after-tax) and $30 million ($18 million after-tax), respectively. (4) As a result of the corporate staff reduction program initiated during the fourth quarter 1994, the company recorded in 1994 a pretax charge of $34 million in administrative and general expense for estimated benefits, primarily termination allowance, to be paid to employees affected by the program. At June 30, 1995, the amount of unpaid benefits remaining on the consolidated balance sheet was $28 million. Approximately 200 employees were terminated during the second quarter of 1995, bringing the total number of terminated employees to approximately 400. (5) Capitalized interest totaled $8 million for the second quarter of 1995 and $9 million for the second quarter of 1994. For the first six months of 1995 and 1994, capitalized interest totaled $16 million and $18 million, respectively. (6) Cash Flow Information: During the first half of 1995, approximately 515,000 shares of Unocal common stock, valued at $14 million, were purchased by the trustee of the Unocal Savings Plan from Unocal. The trustee used Unocal's 401(k) matching contributions to the Plan, which were expensed in Unocal's consolidated earnings statement, to purchase the shares. In the consolidated cash flow statement for 1995, the issuance of Unocal shares and -4- 5 the matching contribution expense were treated as noncash transactions since the resulting effect on cash flow was zero. (7) Income Taxes: The components of pre-tax earnings and the provision (benefit) for income taxes were as follows: For The Three For The Six Months Ended Ended Months June 30 June 30 ------------------------------- Millions of Dollars 1995 1994 1995 1994 - --------------------------------------------------------------------------- Earnings(loss) before income taxes: United States $ (1) $ 28 $ 5 $ 43 Foreign 126 82 251 187 -------------------------------- Total $125 $110 $ 256 $ 230 Income Taxes: Current Federal $ 9 $ 9 $ 16 $ 29 State 2 3 5 7 Foreign 54 50 107 110 -------------------------------- Total current $ 65 $ 62 $ 128 $ 146 Deferred Federal $(12) $ (11) $ (19) $(34) State (11) - (17) (1) Foreign 5 - 12 (3) - --------------------------------------------------------------------------- Total deferred $(18) $ (11) $ (24) $ (38) - --------------------------------------------------------------------------- Total income taxes $ 47 $ 51 $ 104 $ 108 Reconciliation of income taxes at the federal statutory rate of 35% to tax provision (benefit): For The Three For The Six Months Ended Months Ended June 30 June 30 --------------------------------- Millions of Dollars 1995 1994 1995 1994 - --------------------------------------------------------------------------- Earnings before income taxes and cumulative effect of accounting changes $125 $110 $256 $230 Tax at federal statutory rate $ 44 $ 39 $ 90 $ 81 Foreign taxes in excess of statutory rate 15 16 34 35 Dividend exclusion (4) (4) (8) (7) Investment tax credits (7) - (11) - Other (1) - (1) (1) - ---------------------------------------------------------------------------- Total provision $ 47 $ 51 $104 $108 (8) Long Term Debt and Credit Agreements: During March 1995, the company established two credit facilities with banks for general corporate purposes: a $200 million revolving credit facility maturing March 1996; and a $50 million credit facility maturing March 1998, which the company has fully drawn. Borrowings under these two credit facilities bear interest at different margins above London Interbank Offered Rates, and the $200 million credit facility requires payment of a commitment fee on the undrawn portion. In March 1995, the company redeemed $200 million floating-rate Eurodollar notes due in 1996. Floating-rate commercial paper and the new $50 million bank credit facility were used to refinance this debt. In May 1995, the company retired $250 million of 9-5/8% notes. This debt was refinanced with $200 million of 7.20% notes due in 2005 and floating-rate commercial paper. (9) Financial Instruments: During the first half of 1995, the company entered into 11 currency forward contracts to purchase 21 million Pounds Sterling for $32 million to hedge a series of known Pounds Sterling requirements. At June 30, -5- 6 1995, there were 22 outstanding currency forward contracts to purchase 33 million Pounds Sterling for $50 million. The obligations will come due during the period from July 1995 to July 2000. The fair market value of these currency contracts at June 30, 1995, was approximately $1.3 million in assets. The company did not terminate the interest rate swap agreement that was entered into in 1986 to hedge the $200 million floating-rate Eurodollar notes which were retired early in March 1995. The interest rate swap, maturing in 1996, is currently used to hedge floating-rate debt consisting of $150 million of outstanding commercial paper and the draw- down of the $50 million credit facility as discussed in Note 8. At June 30, 1995, the fair value of all the interest rate swap agreements was approximately $6 million in liabilities based on quoted market prices of comparable instruments. The carrying value of debt-related currency swaps in the amount of $133 million was classified as a long-term receivable at June 30, 1995. As a result, the principal amounts of the company's foreign-currency debt, when stated at the current exchange rates, totaled $356 million, an increase of $136 million from year-end 1994. The difference between the carrying value of the currency swaps and the increase in the principal amount of the related foreign-currency debt represents the net loss that would have occurred if the currency swaps and debt were settled at the end of June 1995. This classification has no effect on the consolidated cash flow statement. At June 30, 1995, the company had outstanding contracts covering 325 thousand barrels of crude oil and 13 billion cubic feet of natural gas with notional amounts totaling $6 million for crude oil and $4 million for natural gas. The fair values of the contracts, based on quoted market prices, were insignificant at June 30, 1995. (10) Accrued abandonment, restoration and environmental liabilities: At June 30, 1995, the company had accrued $485 million for the estimated future costs to abandon and remove wells and production facilities, primarily related to worldwide offshore operations. The total costs for abandonments are estimated to be $850 million to $990 million, of which the lower end of the range is used to calculate the amount to be amortized. At June 30, 1995, the company's reserves for environmental remediation obligations totaled $243 million, of which $97 million were included in other current liabilities. The reserve included estimated probable future costs of $38 million for federal Superfund and comparable state- managed multiparty disposal sites; $31 million for formerly-operated sites for which the company has remediation obligations; $80 million for sites related to businesses or operations that have been sold with contractual remediation or indemnification obligations; $75 million for company-owned or controlled sites where facilities have been closed or operations shut down; and $19 million for sites owned and/or controlled by the company and utilized in its ongoing operations. (11) Contingent Liabilities: The company has certain contingent liabilities with respect to material existing or potential claims, lawsuits and other proceedings, including those involving environmental, tax and other matters, certain of which are discussed more specifically below. The company accrues liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Such accruals are based on developments to date, the company's estimates of the outcomes of these matters and its experience in contesting, litigating and settling other matters. As the scope of the liabilities becomes better defined, there will be changes in the estimates of future costs, which could have a material effect on the company's future results of operations and financial condition or liquidity. The company is subject to loss contingencies pursuant to federal, state and local environmental laws and regulations. These include existing and possible future obligations to investigate the effects of the release or disposal of certain petroleum, chemical and mineral substances at various sites; to remediate or restore these sites; to compensate others for damage to property and natural resources, for remediation and restoration costs and for personal injuries; and to pay civil penalties and, in some cases, criminal penalties and punitive damages. These obligations relate to sites owned by the company or others and associated with past and present operations, including sites at which the company has been identified as a potentially responsible party (PRP) under the federal Superfund laws and comparable state laws. Liabilities are accrued when it is probable -6- 7 that future costs will be incurred and such costs can be reasonably estimated. However, in many cases, investigations are not yet at a stage where the company is able to determine whether it is liable or, if liability is probable, to quantify the liability or estimate a range of possible exposure. In such cases, the amount of the company's liabilities is indeterminate due to the potentially large number of claimants for any given site or exposure, the unknown magnitude of possible contamination, the imprecise and conflicting engineering evaluations and estimates of proper cleanup methods and costs, the unknown timing and extent of the corrective actions that may be required, the uncertainty attendant to the possible award of punitive damages, the recent judicial recognition of new causes of action, the present state of the law, which often imposes joint and several and retroactive liabilities on PRPs, and the fact that the company is usually just one of a number of companies identified as a PRP. As disclosed in Note 10, at June 30, 1995, the company had accrued $243 million for estimated future environmental assessment and remediation costs at various sites where liability for such costs is probable. At those sites where investigations or feasibility studies have advanced to the stage of analyzing feasible alternative remedies and/or ranges of costs, the company estimates that it could incur additional remediation costs aggregating approximately $160 million. The company has received a Notice of Proposed Deficiency from the Internal Revenue Service (IRS) related to a 1985 takeover attempt and efforts undertaken to defeat it. The proposed deficiency, if sustained, would increase the company's 1985 taxable income by up to $607 million, of which $201 million would result in decreases in taxable income in subsequent years. The company believes it has substantial legal defenses to the proposed deficiency. In February 1995, the company filed a protest of the proposed deficiency with the Appeals section of the IRS. In the opinion of management, a successful outcome in these disputes is reasonably likely. Although considered unlikely, substantial adverse decisions could have a material effect on the company's financial condition or operating results in a given year or quarter when such matters are resolved. The company also has certain other contingent liabilities with respect to litigation, claims and contractual agreements arising in the ordinary course of business. Although these contingencies could result in expenses or judgments that could be material to the company's results of operations for a given reporting period, on the basis of management's best assessment of the ultimate amount and timing of these events, such expenses or judgments are not expected to have a material adverse effect on the company's consolidated financial condition or liquidity. (12) Unocal guarantees certain indebtedness of Union Oil. For the information of holders of such debt, summarized financial information for Union Oil and its consolidated subsidiaries is presented below: For the Three For the Six Months Ended Months Ended June 30 June 30 --------------------------------- Millions of Dollars 1995 1994* 1995 1994* - ----------------------------------------------------------------------------- Total revenues $2,235 $2,045 $4,196 $3,961 Total costs and other deductions, including income taxes 2,157 1,986 4,044 3,839 Earnings before cumulative effect 78 59 152 122 of accounting change Cumulative effect of accounting change - - - (277) Net earnings (loss) 78 59 152 (155) -------------------------------------------------------------------------- At June 30 At December 31 ----------------------------- Millions of Dollars 1995 1994 - ---------------------------------------------------------------------------- Current assets $1,466 $1,528 Noncurrent assets 8,109 7,822 Current liabilities 1,039 1,275 Noncurrent liabilities 5,593 5,264 Shareholder's equity 2,943 2,811 - ---------------------------------------------------------------------------- *Restated to include the effect of accounting change as discussed in Note 3. -7- 8 UNOCAL CORPORATION (Unaudited) OPERATING HIGHLIGHTS
For the Three Months For the Six Months Ended June 30 Ended June 30 ----------------------------------------- 1995 1994 1995 1994 - ----------------------------------------------------------------------------------- NET DAILY PRODUCTION (a) Crude oil and condensate (thousand barrels): United States 124.3 139.8 128.0 140.9 ----------------------------------------- Foreign: Far East 85.1 86.3 86.2 81.9 Other 30.1 37.6 30.6 37.7 ----------------------------------------- Total Foreign 115.2 123.9 116.8 119.6 ----------------------------------------- Worldwide 239.5 263.7 244.8 260.5 ========================================== Natural Gas (million cubic feet): United States 1,128 1,119 1,126 1,118 ----------------------------------------- Foreign: Far East 602 573 608 581 Other 44 34 41 66 ----------------------------------------- Total Foreign 646 607 649 647 - ----------------------------------------------------------------------------------- Worldwide 1,774 1,726 1,775 1,765 ========================================= Natural gas liquids (thousand barrels) 21.9 21.9 21.7 20.6 Geothermal (million kilowatt-hours) 14.9 20.7 15.2 20.0 Input to crude oil processing units 210 230 200 226 (thousand barrels daily) (b) Sales of petroleum products (thousand 242 237 242 233 barrels daily) (b) - ----------------------------------------------------------------------------------- AVERAGE SALES PRICES Crude oil and condensate (per barrel): United States $15.96 $13.59 $15.33 $12.03 Foreign: Far East $16.77 $14.39 $16.49 $13.83 Other $16.77 $14.42 $16.19 $13.28 Total Foreign $16.77 $14.40 $16.39 $13.61 - ----------------------------------------------------------------------------------- Worldwide $16.30 $13.92 $16.39 $12.64 ========================================= Natural gas (per thousand cubic feet): United States $1.57 $1.84 $1.51 $1.96 Foreign: Far East $2.00 $1.99 $1.98 $2.00 Other $1.00 $1.84 $1.10 $1.80 Total Foreign $1.93 $1.99 $1.92 $1.98 - ----------------------------------------------------------------------------------- Worldwide $1.70 $1.89 $1.66 $1.97 ======================================== (a) Includes production sharing agreements on a gross basis. (b) Excludes volumes of The UNO-VEN Company.
-8- 9 Item 2. Management's Discussion and Analysis of Financial Condition and RESULTS OF OPERATIONS Unocal's net earnings for the second quarter of 1995 were $78 million, or 28 cents per common share, compared with $59 million in the second quarter of 1994, or 21 cents per common share. For the first six months of 1995, net earnings were $152 million, or 55 cents per common share. This compares with a six-month net loss of $155 million, or 71 cents per common share for the same period in 1994. The comparability of the company's reported earnings for these periods is affected by the following special items:
For the Three Months For the Six Months Ended June 30 Ended June 30 ------------------------------------------ Millions of dollars 1995 1994 1995 1994 ------------------------------------------------------------------------------- Special items: Cumulative effect of accounting change: $ - $ - $ - $(277) Write-down of investment and provision for abandonment and remediation of the Guadalupe oil field - (4) - (27) Environmental provision (14) (1) (18) (1) Litigation provision (8) - (12) (17) Mesa settlement - - - 24 Asset sales 8 (6) 37 2 Write-down of assets (9) (4) (10) (4) ------------------------------------------------------------------------------ Total $(23) $(15) $ (3) $(300)
Excluding the special items, second quarter 1995 net operating earnings were $101 million, or 37 cents per common share, compared with $74 million, or 27 cents per common share, in the second quarter of 1994. The 1995 year- to-date earnings, excluding special items, were $155 million, or 56 cents per common share, compared with $145 million, or 52 cents per common share, a year ago. The increases in earnings were principally due to higher earnings from foreign exploration and production activities, agricultural products and carbon and minerals, and a reduction in administrative and general costs. These positive factors were partially offset by losses from West Coast refining and marketing operations and lower earnings from domestic exploration and production activities. The six months 1995 consolidated revenues were $4.2 billion, up from $3.96 billion in the same period a year ago. Increased revenues were primarily due to higher sales volumes and prices for certain refined products, and significantly improved prices for nitrogen-based fertilizers. These increases were partially offset by lower domestic natural gas prices. PETROLEUM EXPLORATION AND PRODUCTION. Earnings for the second quarter 1995 totaled $105 million, compared with $89 million in 1994. For the six-month period, earnings were $214 million in 1995, compared with $170 million in 1994. This year's second quarter and six months earnings included special items consisting of the sales of various oil and gas properties and the write-down of assets. Last year's second quarter and six months results included special items consisting of asset sales and charges for the Guadalupe oil field. Excluding these special items, this year's second quarter earnings were $115 million, up from $102 million in the same period a year ago and the six-month earnings were $213 million compared with $199 million a year ago. The 1995 results primarily reflected higher worldwide crude oil prices, increased natural gas production, and a lower foreign income tax rate. These factors were partially offset by lower crude production and domestic natural gas prices. The company's average worldwide sales price for crude oil in the second quarter of 1995 was $16.30 per barrel, up from $13.92 per barrel a year ago. For the six-month period, the 1995 average sales price was $16.39 versus $12.64 in 1994. During the second quarter 1995, natural gas production increased three percent to 1,774 million cubic feet per day compared with the same period a year ago; however, the worldwide average sales price dropped by 10 percent to $1.70 per thousand cubic feet. The company's oil and gas production costs per barrel of oil equivalent for the first six months of 1995 averaged $3.39 in the United States, $2.05 for foreign operations and $2.84 worldwide. -9- 10 REFINING AND MARKETING. This segment includes the results of 76 Products Company, Unocal's West Coast refining and marketing unit, and other marketing operations. The 76 Products Company recorded a loss of $4 million in the second quarter of 1995, compared with earnings of $5 million a year ago. For the first six months of 1995, 76 Products Company reported a loss of $23 million, compared with earnings of $21 million in 1994. The results for both the second quarter and six months of 1995 were adversely affected by low product margins in the West Coast markets despite reduced operating and selling expenses and slightly higher sales volumes. The 1995 results were also affected by major refinery turnarounds in the first quarter. GEOTHERMAL. Earnings for the second quarter of 1995 were $11 million, up from $9 million in 1994. Six-month earnings were $15 million in 1995, compared with $14 million in 1994. Excluding a gain from the sale of a small interest in the Indonesian geothermal operations, this year's second quarter and six-month earnings were $6 million and $10 million, respectively. Reflected in the current year results were increased earnings from new operations in Indonesia; however, the earnings were adversely affected by electrical generating curtailments by the public utility at The Geysers in Northern California. DIVERSIFIED BUSINESSES. This group consists of the company's agricultural products, carbon and minerals, and real estate operations; and the company's equity interests in various pipelines and The UNO-VEN Company. Net earnings for this year's second quarter were $69 million compared with $39 a year ago. Six-month 1995 earnings were $124 million compared to $73 million last year. Excluding special items for the sale of miscellaneous assets, this year's second quarter and six-month earnings were $64 million and $119 million, respectively. The significant earnings increases were the result of strong nitrogen fertilizer sales prices and volumes and improved lanthanide earnings. Prices for ammonia and urea products on average rose 49 percent compared with the first six months of 1994 while volumes were up by 11 percent. CORPORATE AND OTHER. This category includes administrative and general expense, net interest expense, environmental and litigation expense and other unallocated items. Second quarter 1995 expenses were $103 million ($80 million excluding special items) compared with $88 million ($89 million excluding special items) a year ago. For the six-month period, expenses were $179 million ($165 million excluding special items) and $164 million ($173 million excluding special items) for 1995 and 1994, respectively. Special items for each reporting period included provisions for environmental remediation and litigation. The special items for the six months of 1995 included a $16 million gain from the sale of the process, technology and licensing (PTL) business; and for the same period of 1994, special items included a $24 million gain from the settlement of the Mesa lawsuit. FINANCIAL CONDITION AND CAPITAL EXPENDITURES For the first six months of 1995, cash flows from operating activities, including working capital changes, were $358 million, down from $528 million in 1994. The decrease was primarily due to lower refining and marketing product margins and domestic natural gas prices. The 1994 cash flow included $38 million of proceeds from the settlement of the Mesa Petroleum lawsuit. Proceeds from asset sales were $128 million for the first six months of 1995, compared to $55 million in the same period a year ago. The 1995 proceeds were mainly from the sale of nonstrategic oil and gas properties and the sale of the PTL business. Capital expenditures for the six months of 1995 totaled $596 million, compared with $518 million a year ago. The increase primarily reflects construction at both the Los Angeles and San Francisco refineries to prepare for manufacturing reformulated gasoline by March 1, 1996 that will meet the more stringent standards for reduced vehicle emissions set by the California Air Resources Board, as well as increased development in the Gulf of Mexico. Consolidated working capital at June 30, 1995 was $405 million, an increase of $134 million from the 1994 year-end level of $271 million. The company's total debt was $3,778 million, an increase of $312 million from the year-end 1994 level. Of the total increase, $136 million was due to the current classification of debt-related currency swaps as required by new financial accounting standards. See Notes 8 and 9 to the consolidated financial statements for additional information. -10- 11 ENVIRONMENTAL MATTERS At June 30, 1995, the company's reserves for environmental remediation obligations totaled $243 million, of which $97 million were included in other current liabilities. During the first half of 1995, cash payments of $51 million were applied against the reserves and an additional $32 million in liabilities was recorded to the reserve account, primarily due to changes in estimated future remediation costs for numerous sites. At year- end 1994, Unocal reported 60 sites where it had received notification from the federal Environmental Protection Agency that the company may be a potentially responsible party (PRP). In addition, various state agencies and private parties had identified 30 other sites that may require investigation and remediation. During the first six months of 1995, six sites were added to the list and six sites were removed. As a result, the total remained at 90 sites. Of the total, the company has denied responsibility at 28 sites and at another 12 sites the company's liability, although unquantified, appears to be de minimis. The total also includes 25 sites which are under investigation or in litigation, for which the company's potential liability is not presently determinable. Of the remaining 25 sites, where probable costs can be reasonably estimated, a reserve of $38 million was included in the total environmental reserve as of June 30, 1995. The Guadalupe oil field beach cleanup of underground releases of a diesel- like additive formerly used to produce the field's heavy crude oil has been completed. However, the company will reinforce and monitor the remediation measures that were installed for the cleanup. The company is also assessing and investigating the extent of contamination of the inland portion of the field. An environmental impact report and a natural resource damage assessment will also be completed to identify remediation alternatives. As a consequence, the company accrued an additional $8 million in the second quarter of 1995 for the above remediation/investigation work. Other costs are expected to be incurred which will not be determined until the assessments, investigations and studies are concluded. During the second quarter of 1995, an additional $9 million was added to the reserve for the estimated costs of investigations and remedial activities at the Questa molybdenum mine in New Mexico. OTHER MATTERS On August 8, 1995, a consent judgment was entered in the United States Court of Federal Claims confirming a settlement pursuant to which the company is to be paid $34 million by the United States government in consideration for relinquishing its interests in federal Outer Continental Shelf oil and gas leases in Bristol Bay, Alaska, and offshore southwest Florida, releasing claims arising from Congressional moratoria on the exploration and development of such leases, and releasing claims that its interests in certain leases offshore North Carolina were unconstitutionally taken by federal legislation. The company expects to receive the $34 million prior to the end of the third quarter and will recognize a substantial portion of it as earnings. FUTURE ACCOUNTING CHANGE The Financial Accounting Standards Board recently issued Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-Lived Assets to Be Disposed Of." The company will adopt SFAS No. 121 in 1996. This statement requires the company to review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined that an impairment loss has occurred based on expected future cash flows, the loss should be recognized in the earnings statement. The company periodically reviews its oil and gas properties and other operating assets for impairment. The financial impact of adopting the new accounting standard is not expected to be significant. OUTLOOK Worldwide crude oil prices improved slightly during the second quarter compared to the first quarter of 1995; however, prices are expected to decline in the third quarter due to the weak spot market. Natural gas prices in the United States are expected to stay lower due to low demand and ample supplies. Prices may improve by the end of the year depending upon winter weather temperatures. The company's worldwide production of natural gas is expected to average about 1,786 million cubic feet per day during the full-year 1995, compared with 1,766 million cubic feet per day during 1994. Crude oil and condensate production is expected to average 242,000 barrels per day for the full-year 1995, down nearly 7 percent from 1994. -11- 12 The decrease in crude oil and condensate production is due to the sale of various domestic oil and gas properties. 76 Products Company is implementing a plan which, if successful, could improve annual pre-tax cash flow from its refining and mardeting operations by $120 to $180 million by year-end 1997 from the 1994 level. The improvement would result from further cost reductions, more efficient refining operations, increased output of higher-valued products, improved gasoline sales volumes and new marketing format initiatives. Earnings for agricultural products are expected to decline during the third quarter due to a seasonal decrease in demand. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There is incorporated by reference the information regarding environmental remediation reserves in Note 10 to the consolidated financial statements in Item 1 of Part I, the discussion thereof in the Environmental Matters section of Management's Discussion and Analysis in Item 2 of Part I, and the information regarding contingent liabilities in Note 11 to the consolidated financial statements in Item 1 of Part I. 1.In the litigation previously reported as Angelina Hardwood Lumber -------------------------- Company v. Prairie Producing Co., in the Court of Appeals, Ninth ----------------------------------- District of Texas at Beaumont (No. 09-93-184 CV), Angelina has exhausted all appeals. This matter is now concluded, and the company paid nothing. 2.In the Guadalupe oil field litigation (previously reported as People v. ---------- Union Oil Company of California, Civil No. 75194, Superior Court for San ------------------------------- Luis Obispo County) the trial date of October 2, 1995 was vacated by the court on a motion filed by the California Attorney General. A status conference is scheduled for February 2, 1996. 3.On July 19, 1995 the company pleaded "no contest" to twelve misdemeanor criminal charges relating to the Catacarb release at the San Francisco Refinery in September 1994. This matter was previously reported in connection with the filing of several civil lawsuits. All charges were filed against the company, not against individuals. The charges included the intentional emission of air contaminants causing a public nuisance on September 5 and 6, 1994, and the failure to give timely notification of the release of a hazardous material to the Health Services Office of Contra Costa County and the California Office of Emergency Services. Under the terms of a consent decree, Unocal must pay approximately $3 million, which includes civil penalties, the purchase of emergency response equipment, and the funding of education programs for local communities. The company must also provide additional training for its employees for emergency response and compliance with Bay Area Air Quality Management District regulations. (Bay Area Air Quality ------------------------- Management District, et al. v. Union Oil Company of California, Superior -------------------------------------------------------------- Court of California, County of Contra Costa, No. C95-03165). ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The 1995 Annual Meeting of Stockholders of Unocal Corporation was held on May 22, 1995. The following actions were taken by the stockholders at the Annual Meeting, for which proxies were solicited pursuant to Regulation 14 under the Securities Exchange Act of 1934, as amended. 1. The six nominees proposed by the board of directors were elected as directors by the following votes: Name Votes For Votes Withheld ---- --------- --------------- Frank C. Herringer 199,087,521 2,448,587 John F. Imle, Jr. 197,815,167 3,720,941 Donald P. Jacobs 198,987,395 2,548,713 J. Steven Whisler 199,065,338 2,470,770 Marina v.N. Whitman 199,017,664 2,518,444 John W. Creighton, Jr. 199,041,503 2,494,605 -12- 13 Messrs. Herringer and Imle, Dr. Jacobs, Mr. Whisler and Dr. Whitman were elected for three-year terms expiring at the 1998 Annual Meeting of Stockholders and Mr. Creighton was elected for a two-year term expiring at the 1997 Annual Meeting of Stockholders or, in each case, until their successors are duly elected and qualified. 2.A proposal to ratify the selection of Coopers & Lybrand L.L.P. as Unocal's independent accountants for 1995 was passed by a vote of 199,231,147 for versus 1,349,292 against. There were 955,669 abstentions and no broker non-votes. 3.A stockholder proposal regarding a report on a gas plant expansion in Northern Alberta, Canada, failed to pass, receiving 8,548,037 votes for versus 164,141,272 against. There were 10,328,502 abstentions and 20,518,297 broker non-votes. 4.A stockholder proposal regarding a review of and report on the company's statement of principles regarding international business failed to pass, receiving 10,459,152 votes for versus 153,424,210 against. There were 17,030,249 abstentions and 20,622,497 broker non-votes. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS 3 Bylaws of Unocal Corporation, as amended through May 22, 1995, and currently in effect (incorporated by reference to Exhibit 3 to Unocal's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, File No. 1-8483). 11 Unocal Corporation statement regarding computation of earnings per common share for the three months ended June 30, 1995 and 1994 and for the six-month periods ended June 30, 1995 and 1994. 12.1 Unocal Corporation statement regarding computation of ratio of earnings to fixed charges for the six months ended June 30, 1995 and 1994. 12.2 Unocal Corporation statement regarding computation of ratio of earnings to combined fixed charges and preferred stock dividends for the six months ended June 30, 1995 and 1994. 12.3 Union Oil Company of California statement regarding computation of ratio of earnings to fixed charges for the six months ended June 30, 1995 and 1994. 27 Financial data schedule for the six months ended June 30, 1995 (included only in the copy of this report filed electronically with the Commission). (B) REPORTS ON FORM 8-K During the second quarter of 1995: 1. Current Report on Form 8-K dated and filed April 26, 1995, for the purpose of reporting, under Item 5, Unocal's 1995 first quarter earnings. During the third quarter of 1995 to the date hereof: 1. Current Report on Form 8-K dated and filed July 24, 1995, for the purpose of reporting, under Item 5, Unocal's 1995 second quarter and six months earnings. -13- 14 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. UNOCAL CORPORATION (Registrant) Dated: August 10, 1995 By: /s/ CHARLES S. MCDOWELL ---------------------------- Charles S. McDowell, Vice President and Comptroller -14- EX-11 2 EXHIBIT 11 UNOCAL CORPORATION AND CONSOLIDATED SUBSIDIARIES STATEMENT RE COMPUTATION OF PER SHARE EARNINGS Computations of net earnings per share for the quarters ended June 30, 1995 and 1994 are as follows:
Net earnings (loss) $ 77,944 $ 59,059 $152,081 $(154,978) Less: preferred stock dividends 8,969 8,969 17,938 17,938 ------------------------------------------- Net earnings (loss) applicable to common stock $ 8,975 $ 50,090 $134,143 $(172,916) Average shares of common stock 245,804 242,210 245,298 241,926 outstanding Dilutive common stock equivalent shares 1,050 900 947 865 ------------------------------------------- 246,854 243,110 246,245 242,791 Net earnings (loss) per common share $ .28 $.21 $.54 (.71) Fully Diluted Net earnings (loss) applicable to common stock $ 68,975 $ 50,090 $134,143 $(172,916) Add: preferred stock dividends 8,969 8,969 17,938 17,938 -------------------------------------------- Net earnings (loss) $ 77,944 $ 59,059 $152,081 $(154,978) Average shares of common stock 245,804 242,210 245,298 241,926 outstanding Dilutive common stock equivalent shares 1,616 1,575 1,483 1,457 Conversion of preferred stock* 16,667 16,667 16,667 16,667 -------------------------------------------- 264,087 260,452 263,448 260,050 Net earnings (loss) per common share $.30 $.23 $ .58 $(.60) * The effect of assumed conversion of preferred stock on earnings per common share is antidilutive.
EX-12.1 3 EXHIBIT 12.1 UNOCAL CORPORATION AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Earnings before cumulative effect of accounting change $152 $122 Provision for income taxes 104 108 --- --- Earnings subtotal 256 230 Fixed charges included in earnings: Interest expense 146 141 Interest portion of rentals 25 28 --- --- Subtotal 171 169 Earnings available before fixed charges $427 $399 ==== ==== Fixed charges: Fixed charges included in earnings $171 $169 Capitalized interest 16 18 ---- ---- Total fixed charges $187 $187 ==== ==== Ratio of earnings to fixed charges 2.3 2.1
EX-12.2 4 EXHIBIT 12.2 UNOCAL CORPORATION AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
For the Six Months Ended June 30 ------------------- Dollars in millions 1995 1994 - --------------------------------------------------------------------------- Earnings before cumulative effect of accounting changes $152 $122 Provision for income taxes 104 108 --- --- Earnings subtotal 256 230 Fixed charges included in earnings: Interest expense 146 141 Interest portion of rentals 25 28 --- --- Subtotal 171 169 Earnings available before fixed charges $427 $399 ==== ==== Fixed charges and preferred stock dividends: Fixed charges included in earnings $171 $169 Capitalized interest 16 18 Preferred stock dividends * 29 29 ---- ---- Total fixed charges and preferred stock dividends $216 $216 ==== ==== Ratio of earnings to fixed charges and preferred stock 2.0 1.8 dividends *For purposes of this ratio, preferred stock dividends are adjusted to a pre-tax basis.
EX-12.3 5 EXHIBIT 12.3 UNION OIL COMPANY OF CALIFORNIA AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
For the Six Months Ended June 30 ------------------ Dollars in millions 1995 1994 - ----------------------------------------------------------------------------- Earnings before cumulative effect of accounting change $ 152 $ 122 accounting change Provision for income taxes 104 108 --- --- Earnings subtotal 256 230 Fixed charges included in earnings: Interest expense 146 141 Interest portion of rentals 25 28 --- --- Subtotal 171 169 Earnings available before fixed charges $427 $399 ==== ==== Fixed charges: Fixed charges included in earnings $ 171 $ 169 Capitalized interest 16 18 ----- ----- Total fixed charges $ 187 $ 187 ===== ===== Ratio of earnings to fixed charges 2.3 2.1
EX-27 6 ART. 5 FDS FOR 2ND QUARTER
5 1,000,000 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 130 0 893 0 313 1,475 18,062 11,168 9,569 1,070 3,771 246 0 513 2,172 9,569 4,064 4,196 2523 3,940 1,417 0 146 256 104 152 0 0 0 152 .55 0
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